On-chain is the New Online: Transparency is the Foundational Trust We Need for a Decentralized Future

CIOTechOutlook Team | Wednesday, 19 February 2025, 14:08 IST

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On-chain is the New OnlineIn the crypto world, daily debates rage around the projected value of currencies and the evergreen debate of crypto vs. fiat and gold. But there is a far more important currency that often gets forgotten. This intangible currency is the foundational basis of all our undertakings, public or private. And no business can operate without it. I’m talking about the currency of trust. And like any other currency, it must be earned.?

Think about it. Are you more or less likely to trust a business when they have a website? The same applies for public offices and Government departments. Having a public presence online helps foster trust and accountability. However, trust continues to prove elusive, especially in public offices, as people are often left out of the loop on what happens with their tax dollars.?

Around the world, public trust in governance structures has been recorded for decades. People have become jaded with case after case of large-scale corruption, embezzlement, tax evasion and bribery scandals that have exacerbated the crisis of transparency in government and public-facing institutions. While we have learned to shake our heads and move on to the sheer magnitude of the problem, this distrust has far-reaching consequences including a complete erosion of confidence in democracy and the efficiency of public service departments. A low-trust governance environment bodes ill for the economic health and growth of any country.?

On-chain auditing of public finances?

The CEO of Coinbase, Brian Armstrong, recently courted controversy when he urged the U.S. government to adopt on-chain tracking of government expenditure. Armstrong was responding to Elon Musk’s comments on the Department of Government Efficiency (DOGE) and the US Treasury trying to reframe complex public finance auditing structures for greater transparency. DOGE is reported to have already saved the US Government $36.7 billion with cuts to expenditure.?

Armstrong’s suggestion is visionary in its import. Just imagine a future where instead of highly complex budgets, financing and closed-door inscrutable decisions that affect millions of lives, we actually had the ability to track and trace on-chain exactly how our tax dollars are spent. For one, this would completely remove the scope of information silos that prevent our understanding of complex public finances. On-chain records are tamper-resistant transactions with an audit trail for each. With a well-designed chain such as KALP network, transactions become standardized, immutable and easily searchable.?

Does blockchain fit into the future of public finance??

The Joint Financial Management Improvement Program (JFMIP) report published in December 2023 found that “Financial management processes involving many distributed participants or transactional workflow such as management of a supply chain might find substantial utility in blockchain technology.”?

Blockchain technology is designed to be a public ledger. It is purpose-built for bookkeeping and recording transactions making it the perfect instrument for government accounting. On-chain accounting remedies the current lack of trust around effective utilization of public finances, addresses knowledge gaps in public understanding of budget expenses and improves budget literacy.?

Real-time tracking of public spending on a public blockchain would eliminate misuse or abuse of funds and foster better, more informed debates around managing public funds. Duplications can be prevented by both digital signatures as well as smart contract logic. A significant uptick in transparency and decentralization would earn the elusive public trust governments are always keen on. Increase in budget literacy and awareness also leads to increased demands for operational efficiency from the government and enhanced engagement in democratic processes.?

Negotiating the upfront costs with an eye towards long-term benefits?

I support Brian Armstrong’s point of view, but on-chain auditing may only be a part of the answer to the highly complex trust deficit affecting public institutions. But he is right in suggesting that the time is ripe for us to start moving towards building the baseline of technical standards for transparency protocols.?

There are also very real practical problems to engage with given the substantial costs of integrating new technologies like blockchain into complex bureaucratic processes. Emerging technologies often have high upfront costs that may deter government adoption, but the value of the investment could become undeniable in the long-term. Increased efficiency in government delivery of critical public services could result in citizens enjoying additional and better quality of services. Even if we manage to reclaim only 1% of GDP often lost to misappropriation or corruption, it could very well provide a new lease of life on critical services that are currently severely understaffed or underfunded. It could also be used to boost economic growth.?

We should also take into consideration the cost of running on a perpetual trust deficit. Maintaining the status quo could very well result in irreversible damages in fostering a culture of economic growth and technical innovation.?

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